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Gettin’ Outta Debt pt 8- My Turbocharged Debt Snowball

Hi everyone! I’m back after a bit of a hiatus to re-post an old post from my “How I Got Out of Debt” series from 2009 and to celebrate (albeit 3 weeks late) 6 years of Debt Freedom. YAY!!! I still sometimes can’t believe it.

Wipe our Debt (Photo credit: Images_of_Money)

In the last post I showed how to get out of debt years faster with the money that you are already paying out. In this post I will show you how I was able to save even more money by turbocharging my payment plan. In a lot of ways I’m a very patient person but in this case my Aries impatience came out in full force. I can’t show the actual payment amount since that varied as I mentioned before because my paycheck was not the same each time. So, what I will be showing is the balance, the payoff date, and the savings vs following the status quo payment plan. Then at the end, I’ll show the savings from my turbocharged debt snowball vs the debt snowball I showed in part 7. Remember, the start date was July 2001 and I was in the process of building the emergency fund while starting the debt snowball. My payoff order shown is how the debts are listed in part 7 and the numbers are going to be slightly off because of the payoff dates but not by much. I’m gonna warn you now that there will be lots of repeating of certain phrases and it’s a long post. But that’s how we learn right…by repetition. 🙂

I started with Visa:

Balance-$2,371.53 @ 12% APR. Paid this debt off on 1/23/02, total amount paid: $2,461.29. If you recall under the status quo payment plan the financial industry was hoping that I would follow because the monthly payment is so low, I would have paid a total of $3,250. By debt snowballing I did not have to pay them $788.71. Now I consider myself a generous person but not that generous, especially to some banker who’s making more than what I’m making. $789 dollars would have paid my homeowners insurance for this year (2012).

Next in line was Household Finance:

Balance-$1,000 @ 9.9% APR. Paid off this debt on 3/15/02, with the total amount paid of : $1,035.38. Under the status quo plan I would have paid: $1,333. By debt snowballing I did not have to pay them $297.62. That’s a bit more than what I paid for my Blackberry Playbook Tablet and a case for it which I’ll be doing a review on later.

The next debt I mowed down was the Car Loan:

Balance-$3,571.39 @ 7.9% APR. Paid off this debt on 8/1/02, with the total amount paid of: $3,726.36. Under the status quo financial industry plan I would have paid $3,920. By doing this I did not have to shell out an extra $193.64. That’s almost all my utilities for a month.

Next and done with glee, Capital One and most definitely taken out of my wallet:

Balance-$984.43 @ 9.9% APR. Paid off this debt on 11/8/02, with the total amount paid of: $1,055.92. Under the status quo financial industry plan I would have paid $1,292. By debt snowballing I did not have to pay them $236.08. That’s another month’s utilities, groceries etc.

Next, with even more excitement, Bank of America:

Balance-$4,588 @ 9.52% APR. Paid off this debt on 4/11/03, with the total amount paid of :$5,007.69. Under the status quo financial industry plan I would have paid $5,253. By debt snowballing I did not have to pay them $ 245. Don’t know about y’all but I can sure think of plenty of other things to do with $245 than to give it to some bank unless it’s a deposit into my savings account. 😉

Next on the chopping block, the Perkins Loan:

Balance-$2,027.15 @ 5% APR. Paid off this debt on 5/21/03 with the total amount paid of: $2,128.95. Under the status quo financial industry plan I would have paid $2,320. By debt snowballing I did not have to pay them $191.05. Starting to add up isn’t it?

Next, Direct Student Loans and where it started to become fun:

Balance-$5,786.44 @ 4.22 % APR. Paid off this sucker on 8/29/03 with the total amount paid of: $6,064.23. Under the status quo financial industry plan I would have paid $7,352.80. By debt snowballing I did not have to pay them $1,288.57. That’s $1,288.57 that I did not have to earn to put in someone else’s pocket!

Last but not least the mortgage, where I was laughing like Renfro with each payment:

Balance-$48,175 @ 6.25% APR. Paid off this monstrosity on 6/2/06 with the total amount paid of $54,436.34. Under the loan shark, oops I mean status quo financial industry plan I would have paid $74,763.86. By debt snowballing I did not have to pay them $20,327.52. This is just a bit below what my yearly take home pay was during my journey to debt freedom.

My total savings or what I refer to as money I do not have to come up with by following the loan shark’s (oops I did it again) status quo financial industry plan, $23,568.19!! Now that ain’t chump change and if it is to you can drop me a line so I can send you my PayPal info for a gift in that amount. 🙂 Recall from part 7 by utilizing the debt snowball, the savings was $16,235 which is not chump change either. However by focusing and redirecting a huge portion of any extra funds I had to turbocharge the debt snowball, I saved another $7,333. Nothing to sneeze at there either. Not to mention the fact that you have to earn way more that $7,333 for the privilege of paying that.

I hope that you see just how costly it is to you and profitable for the finance industry to remain in debt. That’s why I kept repeating “By debt snowballing I did not have to pay…” Sorry, but you can never remain above water by continually paying out interest. Where we tend to fail is that we are more concerned about what the payment per month is, instead of focusing on how much in total it is going to cost. And the fact that you are going to have to come up with that payment(S) each and every month for a very long time. And the hours you have to work to make the money to make the payments. I can say this because that was me before I got the message from that cosmic 2 by 4 went oops upside my head for the umteenth time.

Unless you are paying cash, the total price paid is always going to more than the original price using credit. That’s compound interest working against you as most loans are not simple interest loans anymore. What that basically means to you is that they are getting their interest money upfront. That’s why you’ve made hundreds and in the case of a mortgage (thousands) of dollars in payments but your payoff balance is damn near the same as when you first took out the loan. If you have to borrow, and only if you have to, the key is to pay that crap off as fast as you can. The faster you do it, the less it costs you and the more money you have for other things later. Better yet, you can decide on how your money is gonna work instead of your bills deciding what you are gonna do.

I was in already in debt when I bought my home in 2000 so it took me 6 long years with many life happens things happening that cost big dollars and set me back. You know, the 1 step forward, 5 steps back life happens kind of stuff. Finally on June 2, 2006, I was debt free. If your debts are larger and your income is not that big, it is naturally gonna take longer. Remember what I said at the beginning of the this series, that getting out of debt is a lot like locking your hair, going natural or even dieting. It take loads of hard work, patience, determination and thick skin. You gotta get to the point where you are sick and tired of being sick and tired of paying out all this money for stuff you don’t even remember what you spent it on and many times have nothing to show for it. However the result is so, so worth it. And it never goes out of style.

We all want nice stuff and to look good but when life happens in your household, those designers, car makers, fill in the blank aren’t going to give a rats behind about your situation. And please stop worrying about what BayBay & ’em are going to say or think. I’ve learned that folks are gonna talk about you no matter what you do. These same folks ain’t gonna have a dime to help you out when you really need it and they are still gonna talk about you. Most of the time they are worse off than you and want to keep you in that crab barrel along with them because you woke up to the fact that we’ve been played and have been for a very long time. On some level they realize it too hence the put down remarks.

So there you have it. The debt snowball, get the heck out of debt, don’t have to pay nobody any money to do and a real person who’s done it, and showed ya how to do it, plan. I know everyone’s circumstances are different but if you have the income, it can be done. It may take years as I’ve shown.

Stay tuned for part 9 of this series where I will talk about the death pledge aka “The Mortgage”.